The US airline industry, a mobility services market, has known on average a significant growth in the last three decades. The yield management, the increase of the customer purchasing power, deregulation of the airlines industry are some of the major facts that changed the sectors considerably. Although the activity cycle is due to economic situation and terrorist attacks, this market has shown some significant capacity to grow every year in a competitive situation.
We are going to respond to the problem: how can Southwest airlines maintain and develop its activity in the highly competitive airlines market?
In the first part, we are going to present the analysis of the market. We are going to show how the rivalry in the market is high. In the second part, we will focus on strategic alternatives for the company and then we will present our recommendation for the Southwest Airlines.
[...] It arrived and customers didnot travel for a long time. Porter: the five Competitive forces Bargaining power of suppliers: High. The purchases that airlines have are to buy planes, fuel and buy slots for planes in airports. The bargaining power is low with employees because of syndical convention. At the same time, the unemployment rate is high enough to find workers in the market. There are only two plane constructors and it is hard to bargain because of the high level of fixed costs. [...]
[...] Appendix The BCG Matrix of the sector 1 Delta Airlines 2 Continental 3 Jet Blue 4 Southwest 5 American Airlines The size of the circle represents the average of the operating revenues. Bigger the circle, bigger are the revenues. SWOT Strengths: Past growth about 5-10 per year Capacity to prepare for crisis Yield Management and flexible prices which are accepted by customers Competitors are developed on Hubs whereas Southwest is not. Turnaround time is only 15 minutes for the company whereas 45min for the industry Good capacity to sell tickets on the Internet which is cheap Southwest joined some national net reservation systems Profit in the last consecutive 36 years Customers reports ranked second in the world about the performance of the company Costs per seat are the lowest in the industry Fewer number of employees per aircraft. [...]
[...] With the highly structured costs and the will of customers to find low cost tickets, the competition is aggresive among online website comparators, where the customers make their choices. New entrants are really aggressive but most of them fail because one needs a lot of financial resources to succeed. Internal analysis Southwest has been a profitable company for 36 years which is a record in the sector. It is a unique company which developed without a hub strategy. It covers almost all the big cities in the US except the northeast cities which are the most populated. [...]
[...] Recommendations and Implementation Southwest should try to conquest the northeast of America because it is where Southwest can find growth. In order to succeed, the company has to apply a different strategy. It has to act in this part of the US as a pure low cost company, because prices are what matters for customers and competitors are already very strong. The southwest company has already a good image, a relatively low cost structure and a good turnover. With its unique corporate culture and low cost per seat, it has good cards in its hands. [...]
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